Romania Adopts Its First Unicorn

UiPath may not be a household name, but the company is on a torrid growth trajectory. Over the past four months, the firm claims that it has doubled its workforce to about 600 employees across 14 countries to support its software-bot business. With the additional $153 million it just raised from venture capitalists, UiPath can continue that expansion. The firm is now based in New York; it originally hailed from Bucharest.

UiPath is an important player in the robotic process automation business. The company designs software to help automate back-office operations, especially for legacy computer systems. UiPath is noteworthy because it maintains a diverse, enterprise-level client list, including BMW, Exxon, and Huawei.

The latest funding round propelled UiPath to a $1.1 billion valuation, providing entrée to the so-called unicorn club. The term “unicorn” is tech industry jargon for companies that have achieved a valuation level of at least $1 billion. That milestone is an important, albeit arbitrary, rite-of-passage for founders and early-stage investors.

Private-sector valuations are tough to pull apart. Detailed financial data is not readily available, while assumptions about commercial operations are rife. From our arms-length perspective, there are likely two pillars for the UiPath valuation:

► Hypergrowth in Revenue. The firm claims that its revenue grew eight-fold last year, following a similarly robust rate in 2016. Our concern here is that growth companies have a peculiar habit of talking about revenue, as if it is the same as profit. In a turbulent venture-capital setting, investors may quickly shift their attention to net income.

UiPath may aspire to dominate the worldwide market for robotics process automation with its muscular footprint. Outside of Europe and the US, the firm has offices in Dubai, Singapore, and Tokyo, among other cities. Yet we wonder whether the software-bot industry will evolve into a business for local service providers? UiPath may be chasing enterprise clients that will ultimately abandon them in favor of boutique companies, if not in-house development teams.

► Potential in Office Automation. The broad-based market for office-automation technology may reach as much as $50 billion over the next five years, according to Forrester, the market research company, but the software-bot component may be less than 10% of that figure. Investors appear to be buying into robotic process automation firms as an entry point for the bigger office-automation sector. Yet the overall industry may turn into a free-for-all among the biggest tech players.

The software-bot segment capitalizes on the lack of transparency among competitors. In the trenches, UiPath is going head-to-head with business-to-business brands like UK-headquartered Blue Prism and US-based Automation Anywhere. There are many other firms in an industry where, somewhat irreverently, the key barrier to entry may be the ability to hire top-notch coding talent.

Less than a year ago, UiPath was worth a modest $110 million, according to data from Pitchbook. The issue at play, in our view, is the ever-voracious appetite among investors for artificial intelligence. Gartner, the tech-oriented advisory firm, maps artificial intelligence into the initial, innovation-trigger stage of its Hype Cycle for Emerging Technologies.

UiPath is worth singling out because it is more than just another story of a potentially-distorted valuation. We are enamored by the fact that firm traces its foundation to Bucharest. Romania is not widely recognized for its startup ecosystem. In our experience, venture capitalists tend to ignore small markets because of concern over scalability in limited-size hinterlands. Some businesses—like UiPath—easily transcend those borders. Off-the-grid opportunities may deserve closer scrutiny. ■

Our Vantage Point: In Silicon Valley, a unicorn-level valuation is a metaphor for sustainability and permanence. In truth, the figure can be merely a snapshot of current investor fashion.

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